Long Call Options, A Bullish Strategy
Long Call options are a debit strategy, unlike (Selling) Call Options that are a credit strategy.
Long Call Options offer much more potential for dollar gains then writing (Selling) Call Options where our profits are limited to the premium we received for writing the option.
When we buy a Call Option we buy the right to call out the underline security (Stock) at the strike price value that we chose to buy the call option, however we do not have the obligation, we can simply sell out the call option we bought at any time before expiration date.
When we are planning to buy a Call Option we need to be sure that the Stock (Underline Security) we are looking at is a volatile one and with a Pattern ready to explode up.
Timing is crucial, Call Options can lose value fast if the Stock does not move in a fairly passe, when we write (Sell) Options we do not want volatility, we want then to lose their value with time, because we did receive premium for their TIME, however when we are buying, we do want stocks that are volatile.
An Option calculator is a must when buying Options, we could be buying at Call Option today for 2.50 on XYZ stock trading at 45.00 to only see in a few days the option trading at 2.00 and the XYZ stock trading at 45.50, this means that we bought an over priced Call Option.
1. Make sure the XYZ Stock is volatile.
2. Make sure you have a pattern that is ready to explode up.
3. Make sure the Option you are looking to buy is not over priced
4. Make sure that the correlation of the Delta and the Pattern target will allow you to at least make 100% return.
5. Make sure that you chose an expiration date with more time then the time for the stock pattern to complete.
Long Puts Options is a bearish strategy.
Long Put options are a debit strategy, unlike writing (Selling) Put Options that are a credit strategy.
Long Put Options offer much higher potential for dollar gains compared to writing (Selling) Put Options that we are limited to the premium received.
When we buy a Put Option we buy the right to put or sell the underlying Stock at the strike price to the individual underwriting the opition. However, we do not have to exercise the option, we can choose instead to simply sell the option, provided we do it before expiration date.
When we are planning to buy a Put Option we need to be sure that the Stock (Underline Security) we are looking at is a volatile one and with a Pattern ready to drop like a water fall.
Timing is crucial, Put Options can lose value fast if the Stock does not move in a fairly passe, when we write (Sell) Options we do not want volatility, we want then to lose their value with time, because we did receive premium for their TIME, however when we are buying, we do want stocks that are volatile.
An Option calculator is a must when buying Options, we could be buying at Put Option today for 2.50 with the XYZ stock trading at 45.00 to only see in a few days the option trading at 2.00 and the XYZ stock trading at 44.50, this means that we bought an over priced Put Option.
1. Make sure the XYZ Stock is volatile.
2. Make sure you have a pattern that is ready to go down like a water fall.
3. Make sure the Option you are looking to buy is not over priced.
4. Make sure that the correlation of the Delta and the Pattern target will allow you to at least make 100% return.
5. Make sure that you chose an expiration date with more time then the time for the stock pattern to complete.
